Fannie Mae will accept crypto-backed mortgages through the mortgage company’s new product better home and finances and coinbase.
While this is not the first crypto-backed mortgage, it is the first to be accepted by Fannie Mae, which is under government conservatorship. The service allows homebuyers to use crypto assets as collateral. Fannie Mae would buy these loans just like any other conforming mortgage loan.
“We’ve finally built the infrastructure rails that will allow any tokenized asset in the United States to be used to fund someone’s purchase of a home,” Better CEO Vishal Garg said in an interview with CNBC. “It starts with Bitcoin, it starts with (USD coin), but now you’ll be able to pledge Apple stocks, Amazon stocks, or whatever you have in your IRA, whether it’s an exchange-traded fund or a bond fund, toward a home purchase.”
The idea is to serve Americans who have enough crypto assets to cover a down payment on a home loan, but who would incur taxes and lose out on future appreciation when they sell those assets.
New mortgage products allow you to secure financing for your home while preserving your crypto.
“Token-backed mortgages are a huge step toward opening the door to homeownership for young people who have struggled with traditional barriers to saving for a down payment,” Max Brunzberg, head of consumer and business products at Coinbase, said in a release.
To use this product, borrowers must have a Coinbase account and will not only take out a regular mortgage with Better, but also take out a second loan backed by either Bitcoin or USD coins. The second loan is applied to the down payment of the first loan.
Both loans are held by Better, and once pledged, crypto assets can no longer be traded. Even if the value of the virtual currency declines, as long as the borrower continues to make monthly payments, nothing will change on the loan.
For example, for a $500,000 home, a borrower can pledge $250,000 in Bitcoin and take out a $100,000 cash loan as a down payment. Cryptocurrency is stored in Better’s Coinbase Prime account for the life of the loan and returned once the loan is repaid.
The downside is that borrowers end up paying interest on two loans, which increases costs, but Garg said Better offers lower interest rates than most of its competitors, with the same loan interest rates and loan terms.
“In the case of USDC, you can keep the asset appreciating and the holdings you hold in USDC and the yield you get from them can be used to offset your mortgage interest payments,” Garg said.
There is also no private mortgage insurance on the second loan. The borrower will make payments to the better holding both loans at once.
Other companies, such as Milo, also offer crypto-backed loans, but their products are not yet Fannie Mae compliant. These can be much more expensive than Better products and require you to use all of your crypto assets as collateral, not just a specific amount.
But generally speaking, the support of Fannie Mae, whose guardian the Federal Housing Finance Agency has become increasingly bullish on cryptocurrencies, appears to be paving the way for more products like this one.
“I can’t imagine the entire real estate industry not being on blockchain within 10 years,” Tony Giordano, a real estate agent specializing in cryptocurrencies, said on a recent Property Play podcast.
If a Better loan is approved, Coinbase One members are eligible for a rebate equal to 1% of the mortgage price (up to $10,000). Other assets such as Ethereum and Solana may also be added in the future.
